Tuesday, 26 January 2016

A tobacco levy won't work

One of the consequences of David Cameron's flip-flopping and indecision on issues like plain packaging and the sugar tax is that campaigners won't drop their demands even when the government has said it won't meet them. They know that there is always a chance that Cameron will suddenly change his mind.

So it is with the 'tobacco levy', a hare-brained scheme to claw another £500 million out of the tobacco industry (and therefore out of smokers). It was mooted by the Tories (and Labour), but the treasury later conceded that it was impractical. Anyone who has considered the policy for more than five seconds can see that it has intractable problems.

Foremost amongst them is the awkward fact that most tobacco companies are not actually based in the UK. The UK government cannot demand that a company that is headquartered in Switzerland - as JTI and Philip Morris are - hands over an arbitrary sum of money from its profits. It would be like the Japanese government telling Greggs to give it a profit share. It can't be done.

There are still two large tobacco companies headquartered in Britain - BAT and Imperial - but I doubt they will hang around for long if venal politicians start ransacking their profits. In many respects, it is a mystery why they have hung around for so long. Plenty of virtue-signalling politicians would be happy for them to slip off to Bermuda or wherever, taking their jobs with them. A raid on their post-tax profits would surely the the last straw.

Windfall taxes are pretty immoral at the best of times. As I have said before, they are the mark of arbitrary and capricious government. Leaving aside the ethics, they only work if the company you are looting is (a) based in the country, and (b) cannot leave the country.

The tobacco levy is a stupid and unworkable idea. Naturally, then, the 'public health' lobby are very keen on it and have made another PR push today. Their new excuse for wanting it is to finance smoking cessation services.

Cancer Research UK is today (Tuesday) calling on the Government to
make the tobacco industry pay for the damage it causes and help reduce
the number of people killed by its deadly product.

Earlier this month a report published by Cancer Research UK
revealed that cuts to public health funding mean local Stop Smoking
Services are being closed down.

Indeed it did. What it failed to mention was the obsolescence of these vastly expensive and largely ineffective services. The Local Government Association released a surprisingly forthright statement which said, in effect, that it was about time funding was cut.

“Since the advent of e-cigarettes and campaigns such as Stoptober, we have seen the number of users of smoking cessation services fall, while the population of smokers left is now more challenging to get to quit. This means councils are re-evaluating what they do on tobacco control and how to be more effective.

“Councils remain committed to helping smokers quit, however they face significant cuts to public health budgets this year, and spending large volumes of money on a service people are not using will fast undermine the cost-effectiveness of providing it.”

The CRUK press release continues:

Smoking continues to kill more than 100,000 people in the UK every year.

Merely as an aside, this 100,000 figure has been used since the mid-1980s when the smoking rate was very much higher than it is today. Are we to assume that halving the smoking rate has had no effect on the number of people dying from smoking-related diseases?

Internationally, the tobacco industry makes around £30 billion in profit.

Assuming this figure is roughly correct, the entire global tobacco industry makes £30 billion a year from 1.5 billion smokers. In Britain, home to less than one per cent of the world's smokers, the government makes £12 billion from tobacco duty. Who is really profiting from this product? (Answer: nonsmokers.)

CRUK then show us a cute little graphic showing how terribly straightforward their proposal is.

Note that it bypasses all the practical problems by simply saying 'The government
can pass a law'. This could be the slogan of every ban-everything
pressure group on the planet. Unfortunately for them, it's not actually
true in this instance and so the plan falls at the first hurdle.

About Me

Writer and researcher at the Institute of Economic Affairs. Blogging in a personal capacity.
Author of Selfishness, Greed and Capitalism (2015), The Art of Suppression (2011), The Spirit Level Delusion (2010) and Velvet Glove, Iron Fist (2009).

"Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience."